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Financial Growth Prospects of Retail Trading Business of Computer Industry in Dubai

Trade and tourism has always been one of the greatest contributions in Dubai’s growing economy. Growth in the gross domestic product of the debt-laden emirate is “expected to be over 4.5 percent in 2012,” said Sheikh Ahmed bin Saeed Al-Maktoum, the head of the Dubai Economic Sector Committee.

The reaction to the economy of Dubai has been positive, despite its economic contraction in 2009 that adversely affected UAE’s construction sector. The economy phase in 2009 saw the aftershocks of the global financial meltdown. At this point, the well performing trade and tourism sector balanced the country’s economy. Adding to this, the Dubai Shopping Festival opened global doors for trade and tourism and retail traders from all over the world who saw
wide opportunities in Dubai. Trade Fair is considered to be the biggest event of its kind and provides companies an opportunity to showcase their goods and services in the global market and to appoint dealers and distributors for their products, thereby creating a demand for products overseas.

The retail industry has been one of the fastest growing industries in UAE. The positive government policy framework and dynamic participation of the trading sector has created a desirable retail environment and strengthened this sector. According to reports by ‘Booming Retail Sector” in UAE, “despite recession, the retail sector in the UAE continues to grow rapidly with an expected CAGR of over 12 percent to be achieved during 2009-2013. The rapid development of modern retail infrastructure is luring consumers for convenient shopping experience and transforming into high retail spending.” Research company RNCOS reports indicate that UAE will emerge as one of the densest retail markets in the world. It already enjoys the fourth position in being one of the most sought after destinations for retail traders after India,
Russia and China. This is mainly due to the high purchasing power, growing consumer spending, government’s policies and global markets like Dubai Shopping Festival and trade fairs.

This increases the retail space and further uplifts the retail spending. In a report, Raghu Malhotra, area business head Middle East, MasterCard Worldwide said consumer spending has not dropped in the UAE and the rest of the Middle East, despite the global economic crisis. In the last 10 years, UAE has seen the rapid development of a large computer trading and manufacturing sector .Dubai has emerged as the IT center for the Middle East and nearby markets. The computer market in UAE itself represents one of the largest trading sectors and its turnover is almost the same as that of consumer electronics and electrical appliances. The retail network for computers in Dubai is next in size only to the network of food stores, textiles, gold and electronics. The annual turnover of this market is estimated at about US$1 billion per year.Import activities heavily prevail over both manufacturing and re-export activity. Domestic demand for computers and related products forms a major share of the total trade. A substantial portion of the domestically sold computer hardware and software is bought by tourists, shoppers and home-going expatriates, i.e. technically re-exported. According to trading sources, this may be up to 30-40 per cent of the total turnover.

A number of computer traders in Dubai have now started assembling their own PCs for distribution in their re-export markets. Most of the locally assembled PCs are catering exclusively to exports, mainly to Iran, Africa and the Indian sub-continent. However, with stiff competition and lower profit margins, UAE computer dealers are now looking to other markets.

In line with the government’s free trade policy, the intensity of the competition is such that it has led to the UAE market becoming extremely price-sensitive. This leads to the rates of computer hardware and software to be one of the cheapest in the world. This spin off benefit acts in favor of consumers who hence continue to buy from Dubai markets. Large numbers of buyers from
neighboring markets are seen buying large quantities of computer hardware and accessories from the various computer shops in Dubai. From printer cartridges to complete computer systems, buyers buy increasingly large quantities due to the low prices and the availability of a wide range of products which act as major factors that attract buyers to the UAE. The latest models of and almost all major international brands of computers are readily available in the Dubai market besides many new accessories and software. All these factors have combined to make the UAE one of the best places to buy computers from.

Large international retailers plan to open in UAE after watching the growth potential. Data for trade (until Q3 2011) shows a huge improvement in trade numbers over the previous period.
Ahmed Butti Ahmed, the Executive Chairman of Ports, Customs and Free Zone Corporation, and Director-General of Dubai Customs, said “There are certain factors that stood behind the growth. The UAE market accessibility to international markets, and the growing purchasing power have all contributed to the increase in the imports volume while the distinctive higher quality of UAE product together with the support to the national industry and facilities given to exporters have played a prominent role in increasing exports and opening new markets. Dubai’s sophisticated modern infrastructure, advanced services at sea and air ports together with the customs facilitations available to land, sea and air customs ports have contributed considerably to achieve positive results in Dubai foreign trade,” Butti added.

The future of the Dubai retail industry in computer trading business, including the trade of software and computer parts, will see a positive financial future. This is mainly due to the products’ international appeal to buyers, cheap prices along with good international quality, excellent coordination between private and government sector, wide ranges of products and international markets and festivals like Dubai Shopping Festival that provide a global platform for both traders and consumers.